Sanctions Watch | Weekly Vol. 170

Sanctions Watch Vol 170

In the latest edition of our Sanctions Watch weekly digest, we present significant updates on sanction watchlists and regulatory developments.

OFAC Tightens Iran Aviation Sanctions, Suspends Aircraft General License and Sets September 23 Wind-Down Deadline

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has tightened sanctions-related restrictions affecting Iran-linked civil aviation while providing a limited period for companies to wind down previously authorized activities.

Effective September 8, 2026, OFAC indefinitely suspended Iran General License J-1, which had permitted non-U.S. persons to temporarily reexport certain eligible fixed-wing civil aircraft to Iran, subject to strict conditions. The license had covered qualifying U.S.-origin aircraft and certain foreign aircraft containing at least 10% U.S.-controlled content, along with specified onboard supplies and emergency maintenance-related technology.

To facilitate an orderly exit from activities affected by the change, OFAC issued Iran General License DD, authorizing on September 23, 2026 transactions ordinarily incident and necessary to wind down activities previously permitted under GL J-1 and provisions covering payments for Iranian airspace overflights, bunkering and emergency repairs. Payments to blocked persons must be placed in blocked, interest-bearing U.S. accounts.

Separately, OFAC issued Global Terrorism Sanctions Regulations General License No. 37, establishing the same September 23 deadline for winding down transactions involving ECT Aviation Support LLC, S Sistem Lojistik Hizmetler Anonim Sirketi, Mes Cargo Transportation Tourism and Foreign Trade Limited Company, and entities they own 50% or more. These parties were blocked on September 8.

Together, the measures signal heightened U.S. sanctions restrictions on Iran-linked aviation activities while providing a narrow, time-limited compliance window for affected businesses to terminate existing transactions.

OFAC Adopts Presumption of Denial for Iran-Related Licenses, Restricting Approvals to Exceptional and Urgent Cases

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has introduced a significantly more restrictive licensing policy for activities involving Iran. In a Statement of Licensing Policy dated September 10, 2026, OFAC established a presumption of denial for requests seeking authorization to conduct activities prohibited under the Iranian Transactions and Sanctions Regulations (ITSR) and other Iran-related authorities.

The policy follows the Treasury Department’s August 24 announcement of “Operation Economic Outcast,” described in the statement as a whole-of-government economic campaign targeting Iran and its enablers. According to the document, the campaign is intended to remain in place until Iran ceases pursuing nuclear and conventional weapons capabilities and stops actively obstructing the Strait of Hormuz.

As part of the tougher approach, OFAC is also suspending previously issued Statements of Licensing Policy that provided a favorable licensing posture for certain activities.

Under the new framework, Iran-related specific licenses may be granted only when required by law or in exceptional and urgent circumstances, including situations involving risks to life, limb, or environmental safety. Applicants must provide a written attestation demonstrating such circumstances, and OFAC will assess applications individually in consultation with the U.S. Department of State.

The policy signals a substantial tightening of OFAC’s approach to Iran-related licensing, significantly narrowing the circumstances under which otherwise prohibited transactions may receive specific authorization.

U.S. Extends Suspension of Cyprus Arms Embargo Through September 2027, Maintaining Access to Defense Trade

The U.S. Department of State has amended the International Traffic in Arms Regulations (ITAR) to continue its current defense trade policy toward the Republic of Cyprus. Under the final rule published in the Federal Register on September 11, 2026, Cyprus’s status as a proscribed destination and the associated policy of denial will remain suspended from October 1, 2026, through September 30, 2027. The measure takes effect on October 1, 2026.

The decision effectively continues the U.S. policy first implemented in October 2022 that lifted arms-related restrictions on Cyprus. U.S. law requires annual certification that Cyprus continues cooperating with Washington on anti-money laundering reforms and financial regulatory oversight, while also taking necessary steps to deny Russian military vessels access to Cypriot ports for refueling and servicing.

On July 10, 2026, the Secretary of State certified that Cyprus had satisfied these statutory requirements for fiscal year 2027. Consequently, the United States approved continued suspension of the denial policy covering exports, reexports and transfers of defense articles and defense services, as well as retransfers, temporary imports and brokering activities involving Cyprus.

Certain exemptions from licensing requirements will therefore remain available when applicable conditions are met. However, license applications and other authorizations involving Cyprus or Cypriot nationals will continue to undergo case-by-case review by the Directorate of Defense Trade Controls.

The extension preserves Cyprus’s eased U.S. defense-trade treatment for another year while keeping the relief tied to continued compliance with U.S. statutory conditions.

UK Issues New Defence Export Control Guidance to Streamline Licensing with France, Germany and Spain

The UK government has published updated guidance on the Agreement on Defence Export Controls, setting out how exporters can seek licensing treatment under a framework designed to reduce administrative barriers and strengthen defence-industrial cooperation between the UK, France, Germany and Spain. The UK joined the treaty in December 2025, and the latest guidance was updated on September 9, 2026.

The agreement establishes three principal mechanisms. Article 1 covers exports associated with joint intergovernmental defence programmes, while Article 2 facilitates exports and transfers arising from recognised industrial cooperation projects involving manufacturers across participating states. Under both provisions, signatories generally should not oppose qualifying transfers requested by another participating state except where direct interests or national security could be compromised.

Article 3 introduces a de minimis principle, applying where defence-related components supplied by one or more signatory states represent less than 20% of the total value of a final system exported by another signatory state, subject to specified exclusions. It also replaces the usual end-user undertaking with a harmonised Integration Certificate for qualifying applications.

The UK has additionally introduced an Open General Export Licence (OGEL) supporting eligible Article 3 exports, potentially removing the need for individual licence applications where exporters satisfy its conditions.

However, applications under the agreement remain subject to the UK’s Strategic Export Licensing Criteria, preserving national-security oversight while simplifying procedures for qualifying collaborative defence trade.

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Sanctions Watch is a weekly recap of events and news related to sanctions around the world.